Property Tax Cap Said Not To Be As Costly As Thought

Proposal Could Produce Smaller Tax Cuts

October 17, 1990|By Samuel Goldreich | Samuel Goldreich,Staff writer

County officials and the leader of the county's tax revolt agreed yesterday that a proposed cap on property tax revenues could cost Anne Arundel dramatically less than budget officials have estimated, while producing smaller tax cuts than widely believed.

The county Office of Budget has estimated that the county would lose more than $118 billion over the next five years if voters approve a measure to limit increases in property tax revenues to 4.5 percent or the rate of inflation, whichever is lower.

If passed Nov. 6, budget officials have said the revenue cap would force a 10-cent cut in the property tax rate (to $2.36) beginning July 1, at a cost to the county of $8 million. The rate would drop another 16 cents the following year and about 40 cents by 1996, under the budget office's model.

The current county operating budget is $617 million.

In an informal legal opinion disclosed yesterday, Deputy County Attorney David Plymyer said property taxes raised on new construction would be removed from the revenue limit.

That, in turn, would eliminate the need to substantially lower the tax rate to offset the growing property base.

Based on Plymyer's assumptions, she estimated that the tax rate next year would drop by no more than a "couple of cents."

Tax-cap critics have warned that demands for basic services would outstrip the county's ability to pay.

Budget officials have supported opposition to the measure, based on the assumption that it would limit tax revenues without allowing for an increase in the county's assessable base through new development.

But the proposal, as ordered placed on the ballot by the state Court of Appeals, would mandate that the measure be implemented in the context of the state's constant yield tax formula.

The constant yield prohibits localities from increasing revenue on the existing property base.

Under the formula, for instance, a county that experienced no new development could not increase revenues by raising the property tax rate.

It allows growth, however, through taxes on new construction.

Anne Arundel Taxpayers for Responsive Government president Robert Schaeffer expressed vindication yesterday when informed of Plymyer's opinion. "We've been saying right along there's (revenue) growth here, while they've been saying right along the sky would fall."

He said the tax cut would "not be monumental; it's going to be incremental."

Plymyer unsuccessfully argued the county's challenge to the tax measure in Circuit Court and the Court of Appeals, the state's highest court. The tax cap, as proposed by AATRG, was ruled constitutional by the high court.

Plymyer cautioned that his legal opinion, developed only Monday, carries no weight of law and can be disregarded by County Executive O. James Lighthizer or the administration that will succeed him in December. He said he had not made the opinion known to Lighthizer or the County Council.

But, if upheld, his interpretation will further confuse an issue that seems poorly understood by voters and experts alike.

As an example, Brown and Schaeffer noted that legal notices of the ballot measure placed by the county election board have incorrectly described it as a limit on growth in the tax rate rather than total revenues.

Opponents of the tax cap have been following the assumption that the measure would work as in Baltimore County, where a similar charter proposal makes no mention of the constant yield.

Plymyer and Brown attributed the confusion to their perception of the goals of AATRG.

"The only thing we had to go on, strange as this sounds, is what's been reported in the press as the AATRG position," Brown said.

Likewise, the Court of Appeals has yet to issue a written opinion on its ruling, which also upheld the Baltimore County tax measure.